• The Future of Search , Wednesday, May 28, 2008 11:15 AM

In launching Live Search Cashback, Microsoft aims to disrupt the established search business model, cost-per-click. In essence, search guru John Battelle said Live Cashback is closer to the affiliate marketing model-in which merchants pay partners who send traffic to their sites a portion of the sales they generate. With Cashback, Microsoft's Live Search is the one and only affiliate, referring consumers to merchants' discounted products and services, but Microsoft passes along its referral fee to consumers instead of profiting from it. Another way of looking at it is to say we the consumers have become potential partners in Microsoft's affiliate network.

Battelle said that Cashback marks an evolution of the direct response advertising model pioneered by Goto, later renamed Overture Services. Instead of paying for a click or lead, Cashback advertisers only pay for actual sales. The program also incentivizes consumers to make purchases by passing along would-be ad revenue as a discount on the item being advertised.

The reaction from the press has been mixed. But Microsoft executives tell Battelle that Cashback is less about buying back search share (Microsoft's U.S. share is 8-9% compared to Google's 65-68%) than it is "an attempt to disrupt the markets by shifting the value proposition from one of harvesting consumer intent and delivering leads to advertisers (Google's model) to one of harvesting commercial intent and delivering sales to advertisers." Such a model also makes Microsoft's recent purchase of Farecast, a price comparison search engine, a natural fit for integration with Cashback, he said.

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